If you move to Australia but don’t properly exit the New Zealand tax system, you can end up paying tax twice on the same income in both countries.
To avoid this, you need to correctly cease your New Zealand tax residency.
In this article, I’ll cover:
- How to cease being a NZ tax resident
- Key Australian tax rules for new migrants
- A practical checklist before you leave
- 9 common mistakes I see all the time
How to Cease Being a New Zealand Tax Resident
To stop paying tax in New Zealand on your worldwide income, you must meet both of the following conditions.
Condition 1: You must not have a Permanent Place of Abode (PPOA) in New Zealand.
You must take clear and deliberate steps to sever your ties to New Zealand. Actions that demonstrate this include:
- Selling your family home.
- Relocating your immediate family to Australia.
- Resigning from your New Zealand employment and accepting a permanent role in Australia.
- Moving your personal belongings and assets overseas.
- Closing New Zealand bank accounts and transferring funds.
The key is that your connection to New Zealand is no longer permanent.
For example, if you sell your home and your family moves with you, it becomes clear that you no longer habitually live in New Zealand and do not intend to return in the foreseeable future.
Condition 2: You must be absent from New Zealand for more than 325 days in any 12-month period.
This is often called the “325-day rule”.
The days do not need to be consecutive, and even part-days in New Zealand count as full days.
You will remain a New Zealand tax resident until you meet this condition, even if you have already severed your ties.
Key Australian Tax Considerations for New Migrants
Once you’ve sorted your New Zealand tax position, you also need to understand how Australia will tax you.
Australian “Temporary Resident” Tax Concession
Many New Zealand citizens moving to Australia may qualify as a “temporary resident” for tax purposes.
This is not a visa, it’s a tax status.
If you qualify, the key benefit is simple:
You are generally only taxed on Australian income.
Most foreign income, including from New Zealand, may not be taxed in Australia. Capital gains on foreign assets are also generally ignored.
To qualify, you must hold a temporary visa and neither you nor your spouse can be an Australian resident for social security purposes. Many New Zealand citizens on the Special Category Visa (Subclass 444) can meet these criteria.
Practical Checklist When Leaving New Zealand for Australia
- Assess Your Permanent Place of Abode (PPOA): Before you leave, conduct a thorough assessment of your ties to New Zealand. Create a clear timeline for selling property, moving your family, and severing economic connections.
- Notify Inland Revenue: To gain certainty about your tax status, you can complete and submit an IR886 New Zealand tax residence questionnaire. Inland Revenue will then advise you of your residency status based on the information provided.
- File a Final Tax Return: If you will no longer have any New Zealand-sourced income after you depart, you should file a final Individual tax return (IR3) covering the period from the start of the tax year up to your date of departure. This finalises your tax obligations as a resident.
- Manage Ongoing NZ Income: If you will continue to receive income from New Zealand sources (e.g., rental income), you will need to pay tax on that income as a non-resident. This may require filing a Non-resident individual tax return (IR3NR) annually. The DTA may affect the rate of tax applied to this income.
- Assess Australian Residency: Determine your likely tax status in Australia, including whether you qualify as a temporary resident.
- Consider KiwiSaver Portability: Decide if transferring your KiwiSaver to an Australian super fund is right for you, paying close attention to the contribution cap rules.
9 Common Mistakes to Avoid
The key mistake: It is possible to be a tax resident in both countries at the same time. This is known as being a “dual resident”. The Double Tax Agreement (DTA) includes “tie-breaker” rules to decide which country has the right to tax you. These rules look at factors such as where your permanent home is, where your personal and economic ties are stronger, and where you usually live. In simple terms, the DTA decides which country gets to tax you.
Here are 9 other most common mistakes I see:
- Assuming residency changes automatically: Simply moving to Australia does not automatically make you a non-resident of New Zealand. You remain a NZ tax resident as long as you have a “permanent place of abode” (PPOA) in New Zealand, regardless of how long you are away. This is the overriding test.
- Underestimating the PPOA test: Believing the PPOA test is only about owning a house is a significant error. It is a broad assessment of your enduring connections, including family, social, and economic ties. The retention of significant assets, keeping family in NZ, or maintaining club memberships can all point towards having a PPOA.
- Getting the timing of non-residency wrong: Your non-residency status does not begin on the day you leave New Zealand. It is backdated to the day after you cease to have a PPOA, which may be months later (e.g., when your family home is sold). This can result in your Australian income being taxable in New Zealand for longer than you expect.
- Failing to actively sever ties: To cease having a PPOA, you must take clear and decisive steps. Passivity is not enough. Selling the family home, moving your immediate family, and closing personal bank accounts are strong indicators that your ties have been cut.
- Ignoring the Australian “Temporary Resident” rules: Many New Zealand citizens are initially classed as “temporary residents” for Australian tax purposes. This status provides a significant concession, exempting most foreign-sourced income (like NZ rental income) from Australian tax. Failing to understand this can lead to overpaying tax in Australia.
- Mishandling the Double Tax Agreement (DTA): If you are a tax resident of both countries (“dual resident”), the DTA’s “tie-breaker” rules are crucial for determining which country has the primary taxing rights and preventing double taxation. Failing to apply these rules or claim available foreign tax credits can be a costly mistake.
- Incorrect KiwiSaver transfers: When transferring your KiwiSaver to an Australian super fund, be aware of Australia’s non-concessional contributions cap. A large transfer could inadvertently breach this cap, triggering extra tax. Also, ensure you are transferring to an eligible, APRA-regulated fund, not a self-managed one.
- Forgetting to notify Inland Revenue: To gain certainty, it is best practice to notify Inland Revenue of your change in circumstances, for example by filing an IR886 questionnaire. Failing to file a final tax return for the period you were a resident can also lead to future compliance issues.
- Trying to figure it out yourself. Cross-border tax is not something you want to guess. There are multiple moving parts, New Zealand residency rules, Australian tax rules, and the double tax agreement. Getting one part wrong can lead to being taxed twice or paying more tax than you need to. Most people only realise the mistake after the fact, when it is much harder (and more expensive) to fix. Talk to your accountant early.
The Takeaway
Moving to Australia does not automatically take you out of the New Zealand tax system. To avoid being taxed twice, you need to break your New Zealand tax residency properly, understand how Australia will tax you and be aware of how the double tax agreement applies. Get one of these wrong, and you could end up paying more tax than you need to. Get it right, and you can significantly simplify your tax position.
Want specific advice?
Every situation is different, especially if you still have property, investments, or family ties in New Zealand.
If you want clarity on your specific position, apply for free here.